Utilities Yield 2 Points Less Than the 10-Year. The Last Time the Gap Was This Wide Was 2007. Is AI Power Different?

The Utilities Select Sector SPDR Fund (XLU) is currently yielding 2.79%, significantly lower than the 10-year Treasury yield of 4.98%, marking the widest gap since mid-2007. As utilities ramp up construction to meet data center power demands, the upcoming Georgia Public Service Commission elections will be pivotal in determining who bears the costs of this infrastructure. Investors should monitor these developments closely, as they could impact the sector's growth and yield potential.

What XLU Is, and Why Its Yield Is in the News

XLU trailing yield vs 10-year Treasury yield, Jan 2000 to Oct 2026
XLU trailing 12-month yield vs the 10-year Treasury, month-end, Jan 2000 – Oct 2026 (Oct 2026 uses the Oct 29 10-year reading). On XLU's own data, today's gap is the widest since March 2002; on VPU's, since 2007. The 2000–01 spikes come from one-time capital-gains payouts.

The Utilities Select Sector SPDR Fund (XLU) holds the utility stocks in the S&P 500. Most are regulated electric and gas companies that earn a set return on the grid they build. For decades, a utility stock was the stock you bought instead of a bond: lower growth, a fatter check.

Right now the sector sits in the middle of the AI data-center buildout. Data centers need large amounts of new power, and utilities are planning record construction budgets to supply it. At the same time, the bond side of the old deal has changed.

At the end of October 2026, XLU yielded 2.79% on trailing dividends, while the 10-year Treasury paid 4.98% (Oct 29, 2026). Utilities have yielded less than the 10-year every month since August 2022, so the shortfall itself isn't new. What's new is its size: about −2.2 points, the widest since mid-2007.

Why This Week

On Tuesday, Nov 3, 2026, Georgia votes on two of the five seats on its Public Service Commission (Districts 3 and 5). These regulators don't decide whether data centers get built. They decide who pays for the grid those data centers need, and that makes the vote a live test of the affordability risk hanging over the sector. In an Oct 30 Morningstar Investing Insights interview, "Don't Focus on Utilities Stocks' Low Dividend Yields," senior utilities analyst Travis Miller, co-author of Morningstar's Mind the Yield Gap report, drew the same 2000 and 2007 comparison. He came down the other way, though: "I'm not particularly concerned about utilities," he said, arguing that this time is different because utilities are growing earnings for the first time in a generation, with data-center demand behind much of it. His own caveat is years five and beyond, and whether that data-center demand actually shows up.

Performance and yield figures are historical and may change. Total return includes price movement and distributions where available. Past performance does not guarantee future results. Yield is not the same as total return.

The Income, in Real Numbers

XLU pays quarterly. The latest distribution was $0.3004 per share (ex-dividend Sept 21, 2026). At the current price of $43.43, that works out to an annualized run-rate of 2.77%. Over the trailing 12 months (Oct 2025 – Sept 2026, four payments), XLU paid $1.2119 per share, a trailing yield of 2.79%.

Metric (XLU)Figure
Current price$43.43
Latest distribution$0.3004/share (ex-date Sept 21, 2026)
FrequencyQuarterly
Annualized run-rate (latest × 4)2.77%
Trailing 12-month distributions$1.2119/share → 2.79% trailing yield
Expense ratio0.08%
AUM (Oct 30, 2026)$24.1B
10-year Treasury (Oct 29, 2026)4.98%

Distributions are variable. They follow whatever dividends the underlying companies pay, so the next check can be larger or smaller.

On taxes, XLU's holdings are corporations, so its payouts are paid as dividends. The fund's annual 1099-DIV shows how much of each year's payout counts as qualified. Treasury interest is taxed differently: it's exempt from state and local income tax, which widens the after-tax gap for investors in high-tax states. It cuts the other way at the federal level: qualified dividends are taxed at lower federal rates than Treasury interest, which partly offsets the state-tax advantage.

A note on the price data: XLU split 2-for-1 on Dec 5, 2025. Some data feeds still show a 52-week high near $90 that comes from before the split. On a split-adjusted basis, XLU's 52-week closing range is $39.25 – $47.73. All yield and return figures in this piece are split-adjusted.

The Gap: When It Opened and When It Closed

The gap below is XLU's trailing-12-month yield minus the 10-year Treasury yield at month-end. All figures are split-adjusted. The 10-year series is the Federal Reserve's constant-maturity rate. The mid-2007 readings use the Vanguard Utilities ETF (VPU), which showed the same pattern.

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Disclosure: This article is for informational and educational purposes only and is not financial, investment, tax, or legal advice. References to specific securities, tickers, companies, or strategies are provided for informational purposes only and do not constitute a recommendation, solicitation, or offer to buy or sell any security or financial product. We do not provide individualized advice or act as a fiduciary. Investing involves risk, including loss of principal, and past performance is not indicative of future results. We may hold positions in securities mentioned. You should independently verify information before acting on it and consult a qualified professional as needed.